It’s Hard to Be “Too Scared About Bitcoin’s Price Action,” Analyst Says. Here’s Why
Bitcoin has had a bad time recently, but this analyst is not too worried about it, based on the recent trend of the on-chain index.
Bitcoin’s Unrealized Losses Have Been At Low Levels Recently
In a new post on X, on-chain analyst Checkmate mentioned that the recent action of the cryptocurrency price is not too scary considering the Unrealized Loss trend.
“Unrealized Losses” here refers to an on-chain index that tracks the total losses that the Bitcoin network currently holds.
This metric works by going through the transaction history of each coin in circulation to see at what price it was last moved. Assuming that this latest transaction was the last point at which the coin changed hands, the price at the time will reflect the basis of its current cost.
If this cost base is higher than the current spot price of the cryptocurrency for any coin, then that coin can be considered to be holding a net loss that is currently unrealized.
Unrealized Loss subtracts two values to calculate the maximum loss for every coin and sums them up. Naturally, coins of the opposite type contribute to the “Unrealized Profit” metric instead.
In the context of the current discussion, Unrealized Losses themselves are not of interest, but rather a common method called Related Unrealized Losses. This metric divides Unrealized Losses by the asset’s market cap.
Below is a chart showing the Bitcoin index over the last decade or so.
As can be seen in the graph, Bitcoin Relative Unrealized Loss peaked during the November 2022 bear market decline and has remained constant ever since. Recently, the value of the metric has been close to zero, which means that the loss in the market is only equal to a small percentage of the market cap.
The reason for this decline is the recent price hike to an all-time high (ATH). All offers become profitable during the ATH break, so Unrealized Losses are reduced to zero.
The index naturally also went down to zero at the beginning of the year when the ATH happened, but the bearish price action since then means that some of the investors have returned to losses.
Interestingly, the value of the index is still very low, which means that although some buying has occurred at high prices, it has not been excessive.
From the chart, it can be seen that the spikes followed the peaks of the bull market in the past on the display, as only a small drop was enough to put all the latecomers who chased the hype into losses. That has not been the case in the current cycle so far.
“It’s hard for me to be too scared of Bitcoin price action when unrealized losses look like this,” Checkmate commented. The analyst also warns that it could get worse from here, but it hasn’t.
BTC price
Bitcoin continued its recent bearish momentum over the past day as its price has now dropped to $64,500.
